3. Interest Calculation in Advanced Mode in Tally.ERP 9

Theadvanced parametersare particularly useful where interest
rates change from time to time.

·Go toGateway of Tally> F11: Features
> Accounting Features > Set Activate Interest Calculation to Yes. >
Set Use Advanced Parameters to Yes.

·TheInterest Parameterssub-screen is displayed

For
Ledgers created under theGroup
Sundry Debtors/Sundry Creditors, the Interest Parameters sub-screen is
displayed as shown below:

[1]

·SetCalculate Interest
Transaction-by-TransactiontoYes, if you want to calculate
interest for each transaction.

·SetOverride Parameters for each
TransactiontoYes, if you want to override the
interest rates and parameters set here during voucher entry.

·Enter theinterest ratein the Rate field.

·Select the interest rate
calculation period from theInterest
Stylelist in the Per field.

·Select the choice ofbalancesfor which the interest has to be
calculated from the Interest Balances list in the On field. The balances are All Balances, Credit Balances only and Debit balances
only. Interest can be calculated on all outstanding balances, whether debit or
credit. You would like to select only credit balances in case of accounts like
Bank accounts, if you want to know the interest that the bank might charge on
overdrawn balances.

·Select therounding methodapplicable from theRounding Methodslist. The amount can be rounded off
normally or upward or downward. If you do not want any rounding method, selectNot Applicable.

For
Ledgers created under the GroupBank
Accounts, or if the optionCalculate
Interest Transaction by Transactionis
set toNo, then the
Interest Parameters sub-screen is displayed as shown below.

[2]

Enter the interest rate
in theRatefield.

·Select the interest rate
calculation period from the Interest Style list in thePerfield.

·Select the choice ofbalancesfor which the interest has to be
calculated from the Interest Balances list in the On field. The balances are All Balances, Credit Balances only and Debit balances
only. Interest can be calculated on all outstanding balances, whether debit or
credit. You would like to select only credit balances in case of accounts like
Bank accounts, if you want to know the interest that the bank might charge on
overdrawn balances.

·Specify the interest rate
applicable period from the ApplicableFrom:
andTo:
fields.

·Select the rounding
method applicable from theRounding
Methodslist. The amount can
be rounded off normally or upward or downward. If you do not want any rounding
method, selectNot Applicable.

·Applicability- This actually applies to the viewing of the statement and not
the levy of interest.

·Calculate from- You can decide whether interest is to be levied from the Due
Date or from the Effective Date of the transaction (or the voucher date if
effective date is not activated) or even Date ranges specified during Voucher
Entry.

·Choice of methods forRounding off of interest amounts.

[4]

Note:To obtain the optionCalculate from Date Specified during Entry, you must have Override
advanced parameters set to Yes. The option is required if you want to specify
interest to be calculated at different rates for different periods. If you
choose to override parameters then information would be asked during
voucher/invoice entry. The interest information is required after the bill-wise
details have been entered.

Press the
buttonF1: Detailedon the Button bar to see the
calculation and the period. Previous transactions are calculated fromEffective date of Transactionas default. Date Specified during
Entry has not been used.

Note:Part monies received have been accounted for and interest calculated
on the balance.

[5]

A look at Calculate From Dates Specified during Voucher Entry

You
have set up theInterest
ParametersforCP Ltdto calculate on Dates specified during
Voucher Entry.

Acceptthe Voucher Type and return to theGateway of Tally. Create a
ledger account Interest Received under Group Indirect Income.

Voucher Entry for booking Interest

1.Go toGateway of
Tally> Accounting Voucher

2.SelectCtrl+F9:
Debit Note

3.There are two situations for interest adjustment:-

·Simple Interest– Interest amounts are not debited onto the same bills. Create a
fresh reference for it.

·Compound Interest– Amounts are auto-debited to the selected bills. Bill-wise
details will not appear in this case.

·Interest on balances only

Bill-wise interest entry

·DebitCP Ltd

·CreditInterest Received

When
you debit the party account, a list of bills for which interest is applicable
pops up. Select the bills to adjust. Note that even cleared bills appear.

[9]

Select the respective interest bills from the list.The debit amount is filled up with the
total. SelectNew Refin the bill-wise allocation. In theinterest sub-screen, ensure
that the rate of interest is0.
Now,CreditInterest Received. The amount is
already filled in.

Your
voucher will resemble the one below:

[10]

Entries
forcompound interestare exactly the same as for Simple
Interest where all you do is select the Voucher Class Compound Interest. Also
the Bill-wise details popup sub-screen does not come up as the amounts are
added onto the bills.

Select
the required bill from the list and complete aDebit Note.

Now
displayOutstandings for CP Ltd

[11]

The
Bill reference CP/00466993 is the invoice onto which interest has been
compounded.

A new
Reference no 2 has been created for Simple Interest due from CP Ltd.

Entries for Interest on
Balances only

Again,
the issues are Simple and Compound Interest

Compound Interest

Make
the following entries in a Debit note with Compound Interest Voucher Class

·DebitBank Ltd(the amount is automatically filled up
with the calculated interest)

·CreditInterest Received

And
nothing needs to be done! The Bank Account has been increased by the amount of
interest due and the Income account of Interest Received also credited.

Simple Interest

Make
the same entry as above.

However,
since it has the effect of increasing the Bank Ltd account with the amount due
(compound effect), you must make a journal entry to reverse it. The reversal entry
would be something like this:

·Debit Interest Receivable(a current asset account)

·CreditBank Ltd

Use a
normal Journal voucher for this entry.

We
have to necessary go this route to take advantage of the auto filling of the
interest amount which can appear only when we use the Bank Ltd account in Debit
Note in the first place.

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